The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that the business profit earned by the US talent agency for arranging Maroon 5 performance in India cannot be assessable in India for the want of a Permanent Establishment (PE).
The assessee is a non-resident company incorporated under the laws of the USA and is a tax resident of the USA and is engaged in the business of branding and talent book agency services and inter alia acts as a mediator to and in coordination with several worldwide event management company for arranging live performances by renowned artistes from around the world.
The assessee entered into an agreement with Big Tree Entertainment Pvt. Ltd. in India to make the services of the “Maroon 5” artiste available for a live musical performance at a private event held in India. The assessee received Rs. 4,15,02,000/- from the Customer after a deduction of TDS of Rs. 45,32,019/- under section 195 of the Income Tax Act.
The assessee filed its return declaring NIL income and claimed a refund of tax withheld by the Customer. The assessee’s case was selected for scrutiny under Computer-Assisted Scrutiny Selection (CASS) and statutory notices along with a detailed questionnaire were issued to which the assessee responded by filing necessary information and details electronically.
The Authorized Representative submitted that the Assessing Officer failed to appreciate the fact that the assessee is engaged in the business of providing talent booking agency services to its clients globally.
During the course of assessment proceedings, the assessee submitted an extract of the copy of the tax residency certificate, a global consolidated financial statement along with the income tax return of the group filed in the US which establishes the fact that the group of companies of which the assessee is a part has earned revenue from business amounting to more than 11 billion USD.
It was further submitted that as per Article 7 of the India-USA DTAA business profits of a non-resident cannot be taxed in India if the non-resident does not have a PE therein. And the Assessing Officer has erroneously arrived at a conclusion that an enterprise can be said to be engaged in business only if it carries on such business through a PE in India.
The Departmental Representative supported and relied upon the order of the Assessing Officer/Dispute Resolution Panel.
The Two-member bench comprising of G.S. Pannu (President) and Astha Chandra (Judicial member) held that the impugned receipts of the assessee from the Customer constitute business profits and hence are not chargeable to tax in India in the absence of the PE of the assessee in India.
Thus, the appeal of the assessee was allowed.
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